The native Sigmadex token is the definition of a utility token and is a required peripheral for a healthy ecosystem and governance model that provides efficiency within the Sigmadex protocol.

Deflationary & Penalty Mechanics

As penalties occur, the programmed on-chain monetary policy deflates the total token supply of the native Sigmadex token making it more scarce as time goes on.

The deflationary aspect is calculated similarly to a home mortgage that is front-loaded with interest, making the majority of penalties occur towards the genesis of a locked liquidity stake. While the deflationary algorithm is front-loaded with penalties, it also carries a breakeven point towards the end of the cycle to incentivize holding until the contract is matured.

Governance

Sigmadex token holders are given the power to vote on Sigmadex's default parameters. Interest reward rates, restaking multiplier, and major protocol changes are to be determined by all native token holders to accurately represent the community.

In traditional finance, a central power makes these decisions and is often biased to benefit themselves. In Sigmadex, the community has control over important variables, which in the long run, should suit the best interest of the protocol. It is very important to retain a healthy balance to achieve ideal long-term sustainability.

Liquidity Provisioning

The native Sigmadex token is essential for staking in all liquidity pools. The purpose is to balance each pool with another liquid asset of value that supports the Sigmadex pre-programmed monetary policy, hence choosing other tokens would not work as intended. By backing assets with the Sigmadex token we remove unnecessary negative pressure from the order book, increase adoption through value appreciation, and create an ecosystem that sustains itself which stems from the application's core.

Token Cycle

Unlike many standard protocols, bad actors are not harmful to the ecosystem and serve a purpose in balancing the overall Sigmadex economy. The penalty system rewards good actors who follow the protocol rules in multiple ways while effectively closing the token loop. This enables a healthy transfer of wealth from bad actors to good actors meanwhile adding scarcity to the native token supply through the token burn mechanism which is factored into the penalty computation.